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How do i solve this question .
Plyman has 100 employees. Each is entitled to five working days of paid sick leave for each year, and unused sick leave can be carried forward for one year. Sick leave is taken on a LIFO basis (ie first out of the current year’s entitlement and then out of any balance brought forward).
As at 31 December 20X8, the average unused entitlement is two days per employee. Plyman Co expects (based on past experience which is expected to continue) that 92 employees will take five days or less sick leave in 20X9, the remaining eight employees will take an average of 6½ days each.Required
State the required accounting for sick leave.Hi,
The accounting is based upon the accruals concept, whereby we have to record the amount of sick days earned during the year by each employee. Once we have calculated the amount earned we then record it by DR Expense CR Sick pay accrual (liability).
To do this we need to work out the total sick days accrued in the year as a proportion of the total days worked in the year. The total days worked each year by all employees will be 26,000 (=100 employees x 52 weeks x 5 working days per week).
At the start of the year the sick days accrued will be 200 (=100 employees x 2 days average per employee). This gives a proportion of total wages to be accrued of 0.77% (=20/26,000).
At the end of the year the sick days accrued will be 224 (= 184 + 40 = (92 x 2) + (8 x 5)). This gives a proportion of total wages to be accrued of 0.86% (=224/26,000). be careful here as the employees who claim 6.5 days are only entitled to 5 days so we do not need to accrued for 1.5 days as they do not earn these 1.5 days.
Hope this helps on a pretty complicated area of IAS 19.
Thanks
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